Core Observation

Using absolute normalized volatility-of-volatility, defined here as:

gamma = Abs(normalized vol-of-vol)

the data show a clear post-2006 increase in market instability, with both Trump periods showing higher gamma than the Biden period and the current Trump period showing the highest value in the comparison.

Gamma by Period

Main Interpretation

The data speak against the common narrative that Trump is automatically better for markets.

By this measure, Trump is associated with higher market instability, not lower instability. Both Trump periods show a substantial increase relative to the pre-2006 baseline, and both are higher than the Biden period.

The most striking comparison is Biden versus the Trump periods. Biden’s period includes major sources of macroeconomic and geopolitical stress:

• COVID aftershocks
• inflation
• aggressive Federal Reserve tightening
• Russia’s full-scale invasion of Ukraine
• regional-bank stress
• Middle East instability

Yet Biden’s gamma is the lowest of the post-2006 political periods listed here.

That suggests the market was not merely responding to crisis severity. It was likely responding to the predictability of the policy regime.

Policy Legibility Versus Crisis Severity

Markets can price bad news when the policy reaction function is legible. Inflation, Fed tightening, war, and banking stress are serious shocks, but they are analytically tractable if institutions behave predictably.

What markets struggle with is regime uncertainty:

• abrupt tariff announcements
• sudden policy reversals
• threats against firms or sectors
• political pressure on independent institutions
• unpredictable geopolitical escalation
• ad hoc executive intervention in private markets

This is where Trump’s governing style matters. Trump may be marketed as pro-business, but market stability is not only about tax cuts or deregulation. Markets also value predictability, institutional constraint, and credible policy signaling.

The Trump period is the highest in the sample. That weakens the claim that Trump is better for markets. Markets like profits, but they also like predictability, and Trump’s governing style appears to inject regime uncertainty directly into asset pricing.

Consequences

Higher market uncertainty does not necessarily imply lower corporate earnings or lower long-run equity returns. What it does imply is that short-term return distributions are less predictable relative to the baseline. When volatility itself becomes more volatile, investors face greater uncertainty about risk, not just direction. That tends to raise derivative prices, increase demand for hedging, complicate monetary-policy expectations, and make risk management more expensive.

Caveats

This is an association, not a complete causal proof. The 2025-present period is also shorter than the other windows, so it may be disproportionately affected by clustered volatility events.

Before making a formal causal claim, the analysis should be stress-tested using:

• confidence intervals by period
• bootstrap resampling
• sensitivity to window length
• exclusion of major crisis weeks
• comparison with VIX level
• comparison with MOVE index
• comparison with credit spreads
• comparison with economic policy uncertainty indices

Bottom Line

The post-2006 market regime appears structurally noisier than the pre-2006 regime. But the increase is not evenly distributed.

Obama-era instability is plausibly connected to the post-financial-crisis QE regime. Trump I shows a further increase. Biden, despite major shocks, shows the lowest post-2006 political-period gamma. Trump II, so far, shows the highest.

The simplest interpretation is that markets are not merely reacting to external shocks. They are reacting to the predictability, or unpredictability, of the policy regime itself.

The market does not just price tax cuts. It prices chaos. And by this measure, Trump is the chaos president.